Comment: Another nail in the coffin of pensions confidence

Millions of people may now be unable to transfer money from final-salary pension schemes. Or so I read in the Financial Times on Wednesday morning.

The Occupational Pensions Regulatory Authority (Opra) has suspended rules governing withdrawals - apparently because it is concerned about a possible run on the funds in underfunded schemes.

A run on the funds? From gold-standard final salary schemes? Were they joking?

I then learned that the so-called ban on withdrawals appeared to have been rushed through before employees got wind of plans by the Department of Work and Pensions to encourage the imposition of exit penalties worth up to 40 per cent on withdrawals from underfunded schemes.

That made much more sense. You only have to look at what's been happening with exit penalties on with-profits funds to understand why those forewarned would wish to get at their funds before the axe fell.

Until the rules were relaxed, trustees had to provide a transfer value within three months. The new DWP measures are due to be published in June - three months' time. I don't think that's a coincidence.

Just one more nail in the coffin of consumer confidence in pension savings, then. The latest of many.

When the Government encouraged us to pile into personal pensions in the late 1980s, we did so with gusto - only to discover that silken-tongued salesmen had been making a fast buck by illegally flogging inappropriate plans to more than 1 million people.

Then, in the benign investment climate of the 1990s, a number of employers scrapped contributions. Infected by the same dangerous complacency, Gordon Brown abolished dividend tax credits, thus boosting Treasury coffers by billions a year at the expense of ordinary people's pension savings.

What happened next? Oh yes - the stock market crash and, just to make things even more interesting, warnings that life expectancy was going through the roof.

Individual and company pension pots melted away like snow in springtime. Employers fell over themselves to switch from final-salary schemes to investment-linked schemes, thus shifting the risk to employees.

Stiffer regulations governing pension funding have also been blamed, but were really only shiny new locks fitted to an empty stable, the horse already being well on the way to the knacker's yard.

Meanwhile, Lord Oakeshott, the Lib Dems' pensions spokesman, last week accused the chancellor of "grossly misleading" high-earners about the effects of a £1.4 million lifetime limit on pensions savings.

The Government argues that only "a small minority of well-paid people" will be affected, perhaps 5,000.

Rubbish, say the Lib Dems. Up to 90,000 will be hit immediately, and a whole lot more people will be caught in the net as time goes on. The £1.4 million limit will rise in line with inflation, not earnings.

Anyone with pension savings of more than £1.4 million will be forced to pay 60 per cent tax on the balance. What on earth is the point?

The Inland Revenue is hardly going to clean up on the proceeds, and those affected will simply find other ways of boosting their retirement income.